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Oct 10 - 06:55 PM

USD: 3 Narratives Supporting A Stronger USD Into Year-End - ING

By eFXdata  —  Oct 10 - 03:00 PM

ING Research maintains a bullish bias on the USD over the coming weeks.

"Last week’s action in the FX market conveyed a clear message that it is too early to turn more structurally bearish on the dollar or bullish on pro-cyclical currencies. This week, markets may find further confirmation that this is the case, with a few key threads to follow.

First, US CPI figures on Thursday should show a decline (we estimate from 8.3% to 8.1%) in headline inflation caused primarily by lower gasoline prices, but at the same time an acceleration in the core rate (we estimate from 6.3% to 6.5%), mainly driven by housing costs and recreation prices," ING notes. 

"Second, Fed communication. A 75bp hike for November and a 4.60-4.70% peak rate are now in the price, but additional hawkish comments – if backed by an inflation surprise for example – could encourage markets to speculate on larger hikes or a more prolonged tightening cycle.

Third, geopolitical and energy market developments. There have been signs over the weekend that any optimism over an imminent de-escalation in the Ukraine conflict may be misplaced.

A re-test of the 114.76 September high in DXY is our base case over the next few days," ING adds. 

ING Research/Market Commentary


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